Types of Variances
Variances can be divided according to their effect or nature of the underlying amounts.
When effect of variance is concerned, there are two types of variances:
- When actual results are better than expected results given variance is described as favorable variance. In common use favorable variance is denoted by the letter F - usually in parentheses (F).
- When actual results are worse than expected results given variance is described as adverse variance, or unfavourable variance. In common use adverse variance is denoted by the letter U or the letter A - usually in parentheses (A).
The second typology (according to the nature of the underlying amount) is determined by the needs of users of the variance information and may include e.g.:
- Variable cost variances
- Direct material variances
- Direct labour variances
- Variable production overhead variances
- Fixed production overhead variances
- Sales variances
Read more about this topic: Variance (accounting)
Famous quotes containing the words types of and/or types:
“... there are two types of happiness and I have chosen that of the murderers. For I am happy. There was a time when I thought I had reached the limit of distress. Beyond that limit, there is a sterile and magnificent happiness.”
—Albert Camus (19131960)
“The bourgeoisie loves so-called positive types and novels with happy endings since they lull one into thinking that it is fine to simultaneously acquire capital and maintain ones innocence, to be a beast and still be happy.”
—Anton Pavlovich Chekhov (18601904)